Perella Weinberg’s Arbess See Euro-Zone Bond: Tom Keene

April 10 (Bloomberg) -- The European Union will eventually
create a euro-zone bond when countries such as Germany are
satisfied with efforts by member nations to reduce deficits,
according to Perella Weinberg Partners LP’s Daniel Arbess.

“There’s going to be one debt issuance that will be backed
jointly and severally by all the European countries,” Arbess, a
partner in New York at Perella Weinberg who manages the Xerion
hedge fund, said today in an interview on Bloomberg Radio’s
“Bloomberg Surveillance” with Tom Keene and Ken Prewitt. “It
hasn’t happened yet because Germany and the other countries that
ultimately are going to have to be bankrolling this process want
to see more structural reform in the debtor countries.”

Perella Weinberg would buy the securities because Europe’s
consolidated debt load is less than that of the U.S., according
to Arbess.

“Ultimately, we would buy a euro bond,” Arbess said. “On
a consolidated basis, when you look across all of Europe, the
strong countries and the weak countries, Europe’s debt load is
significantly lower than the U.S. and Japan.”

Treasuries have lost 0.4 percent this year as of yesterday,
compared with a 0.6 percent gain for German debt and a 0.9
percent decline for Spanish debt, according to Bank of America
Merrill Lynch index data.

Spain’s Budget Cuts

Efforts in Spain to calm investor concern with 10 billion
euros ($13 billion) of budget cuts in education and health
failed to stem concern the nation may be the fourth euro member
to need a bailout.

The yield on Spain’s 10-year benchmark bond surged 22 basis
points to 5.98 percent as Economy Minister Luis de Guindos
declined to rule out a rescue for Spain. Bank of Spain Governor
Miguel Angel Fernandez Ordonez said the nation’s lenders may
need more capital if the economy weakens more than expected.

Germany’s 10-year yield fell nine basis points to 1.64
percent, approaching the record low 1.636 percent set by
Europe’s benchmark government securities Sept. 23. The five-year
yield decreased as much as 10 basis points to 0.617 percent, the
least on record.

In Spain, “the pressure is going to be on again for an
acceleration of fiscal consolidation, for more monetary
intervention by the European Central Bank,” Arbess said.
“We’re not particularly concerned about it. This is part of the
ebb and the flow of what we call the tape and Band-Aids
environment, the tape and Band-Aids economy, where government
policy has to continue to respond to pressures that are imposed
by market forces.”